Paramount Skydance (PSKY) appears confident about winning a bid to acquire Warner Bros. Discovery (WBD) and also clearing regulatory hurdles. The media giant raised its breakup fee from $2.1 billion to $5 billion, which it will be liable to pay WBD if the deal is struck but not finalized. The news sent PSKY stock down 7.3% as investors shrugged at the higher breakup fee amid heightened regulatory scrutiny of mega-mergers.
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Paramount is competing with larger streaming giants Netflix (NFLX) and Comcast (CMCSA) in Warner Bros. Discovery’s bidding race. The three companies submitted their revised offers to WBD on December 1. WBD may soon open exclusive negotiations with one bidder, though the specifics of the offers remain confidential.
Paramount Is Backed by Ellison Family
Paramount has been among the lead bidders for WBD, having had three prior offers rejected. According to TheWrap, Paramount Skydance, led by David Ellison, has backing from his billionaire father, Larry Ellison (ORCL), along with three Middle Eastern sovereign wealth funds and debt financing from Apollo Global Management (APO). In November, Paramount denied rumors that it was in talks with UAE wealth funds for financial backing in the WBD deal.
Ellison’s bid could need approval from the Committee on Foreign Investment in the United States (CFIUS) if foreign investors gain 25% or more voting rights in a U.S. company and a foreign government owns 49% or more of the foreign investor. However, reports suggest the Ellisons are expected to keep majority ownership, and foreign investor levels are unlikely to trigger a regulatory review. Apart from the breakup fee, Paramount previously offered WBD CEO David Zaslav a co-CEO and co-chairman role at the merged company.
Paramount Skydance wants to acquire the entire company, including WBD’s studios, news operations, and legacy TV assets, while Comcast and Netflix are focused only on WBD’s movie and television studios and the HBO Max streaming service.
Is PSKY Stock a Buy, Hold, or Sell?
Analysts remain highly cautious about Paramount Skydance’s long-term outlook. On TipRanks, PSKY stock has a Moderate Sell consensus rating based on one Buy, eight Holds, and five Sell ratings. The average Paramount Skydance price target of $14.36 implies 2.1% downside potential from current levels. Year-to-date, PSKY stock has gained nearly 42%.
